Tesla Motors, Inc., its stock trading at an all-time high, releases fourth-quarter results Wednesday after the market’s close. Analysts surveyed by FactSet see it earning 22 cents a share, sharply reversing a year-ago loss. Those same analysts see it posting revenue of $679 million for the quarter, more than doubling the $306 million reported a year earlier.
While these numbers will guide the market’s initial reaction, others could carry as much or even more weight in determining whether the stock can defend its recent rally. Among them: gross margin.
After the third quarter, Tesla CEO Elon Musk said told investors he was “pretty confident” they could hit 25% gross margin in the fourth quarter (excluding zero-emission vehicle credits). He’ll be pressed hard for an explanation if the company misses this one.
Similarly, anything Musk says about 2014 deliveries will be crucial. It’s the one basic metric Tesla shares with every other car company, regardless of the technology they use. Currently, analysts are looking for about 29,000 vehicle deliveries this year, though some estimates run as high as 32,000.
For the record, Tesla has already announced it sold 6,900 vehicles in the fourth quarter, 20% more than expected.
Alongside deliveries come orders. Any sign the order book is shrinking can be interpreted either as a production success or a worrisome sign that demand for high-end electric vehicles (EVs) is slowing. To keep things fresh, Tesla is adding to its lineup with its Model X crossover SUV. The latest word is that the Model X will be available late this year or early 2015, followed in 2016 by the entry-level “Gen 3” platform, which Musk has said will retail for about $35,000, or half the price of a Model S. This is the car Musk is counting on to take EVs mainstream.
Capital spending is another number in the crosshairs. Tesla’s fourth-quarter expenditures are seen coming in at about $73 million, a level analysts expect the company to hold through the rest of the year. But there are a couple of wild cards in the mix. One is the cost of building out its U.S. and European recharging station networks, which are essential to securing Tesla’s primacy in the EV marketplace. The other is the cost of adding a possible second assembly line at its Fremont, Calif., plant.
If all goes as analysts expected, analysts predict Tesla will end the fourth quarter with a welcome $216 million in free cash flow.